Monday, October 25, 2010

Skelton Shift Update: October 25, 2010

G20 Weekend Results:

(see Pat's more thorough blog below on this subject or click HERE)

I don't see how it will be possible for the FED to not move currency markets in a "measured" efforts. Following the EUR/USD the past month shows how speculative moves have been. In 2005 it has been recorded that 80% of currency moves were all speculative. In 2010 this number probably well over 90% considering pip range expansion in all trading sessions along with the even more explosive boom in retail participants over the past 5 years.

As we currently speak the GBP and the EUR have moved over 100 - 120+ pips from Sundays open trading. As follows US equities futures are strongly up, dollar correlation plays on crude are still in effect which will continue to drag on upward fundamental bias keeping it in a range. What has happened over this weekend? Looks like markets don't believe anything changed as the typical weak dollar, strong equities story is still in play. At these levels, I'm not fully buying into that story again just yet.

I'll wait for key level confirmation before fully committing to one view.

I could have been wrong on the pound to expect a wider range of 1.53 to 1.60 if markets take prices back to 1.60 resistance from current levels. Either way on the down side 1.53 and to the upside 1.60 is the decider for trend direction. I will stay out of reading the EUR as the noise makes the chart too convoluted to read clearly. I'll have to cross examine other majors to confirm where the trend will head this week. On the whole though, short term, I am bull dollar but longer term out expect to see strong continued dollar weakness.

I'll have to do more analysis and research to get a more clear time frame, but post NOV 2nd, trends should be clear if the past weeks/months correlation will continue hold or will change the game.


Technicals on the SPX are a bit conflicting just as the dollar story technicals (dollar story: short term bearish momentum within a strong uptrend). Weak volume on yesterday fridays move questions higher ground justification into the 1200's. However momentum to the upside via short term and long term SMAs calls for much higher prices. To me, technically a correction to 1125 will justify a move to 1300 for the bulls (IMHO).

What do I believe? Its hard to argue against such strong upward momentum, but I remain bear and will look for the 1125 level to the downside. SMA is lagged in price action and there for it maybe possible to see my expected correction to support levels before continuing higher if the bull story stays in tack (need to re-assess at this level). A strong fail at the 1200 or slightly above the 1200 will give strong support/evidence for bearish price patterns of a higher low from the 1220 seen back in April 2010 and the 1300 level seen back in 2008.

Though, A break below 1125 and bears will be the winners for the year.

Where do the bulls win? A strong break above 1220.

So to recap:

  • Dollar short term bull and long term bear

  • SPX short term bear and long term needs assessment if I am right on the bearish move to come.

  • Oil I am fundamentally bull - but the macro environment can skew fundamentals so ill call neutral on this bad boy and leave it to the range traders.

Give me two more weeks of price action against my thesis and I will throw my hands up in the air in complete utter defeat.

*remind me to reassess the strength of dollar and SPX at the end of the week for performance check.

Key Levels to Watch this week:

GBP/USD: 1.53, 1.60 (watch the break outs or range bounces)
EUR/USD: 1.41, 1.40, 1.37
SPX: 1200 + or -
Oil: below 80, and above 84

-A Lê

1 comment:

  1. I could not agree more with your Crude range. $4 up then $4 down. Maybe we will get an oil spill (I am-eco friendly) or something that derails crude traders from the $ trade. Also, I'm with you on the SPX. In light of Today's weak close, I expect some selling pressure tomorrow. The EUR/USD is like a pretty girl who draws you in for a kiss and then pushes you away. However, she manages to keep you chasing her....


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